Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions, as applicable. Income (loss) from continuing operations before income taxes included income (loss) from domestic operations of $1,736, $1,473 and $(106) for the years ended December 31, 2014, 2013 and 2012, and income (loss) from foreign operations of $(37), $(2) and $17 for the years ended December 31, 2014, 2013 and 2012.

The provision (benefit) for income taxes consists of the following:



	For the years ended December 31,
	2014			2013		2012
Income Tax Expense (Benefit)
Current - U.S. Federal	$	(62	)	$	219	$	33
International	2			—		—
Total current	(60		)	219		33
Deferred - U.S. Federal	410			27		(342		)
Total income tax expense (benefit)	$	350		$	246	$	(309	)

Deferred tax assets and liabilities on the consolidated balance sheets represent the tax consequences of differences between the financial reporting and tax basis of assets and liabilities.

Deferred tax assets (liabilities) include the following:



	As of December 31,
Deferred Tax Assets	2014			2013
Tax discount on loss reserves	$	573		$	632
Tax basis deferred policy acquisition costs	163			207
Unearned premium reserve and other underwriting related reserves	456			434
Investment-related items [1]	1,020			1,641
Insurance product derivatives	44			13
Employee benefits	677			523
Alternative minimum tax credit	652			823
Net operating loss carryover [1]	1,936			1,093
Foreign tax credit carryover	178			163
Capital loss carryover	172			—
Other	—			63
Total Deferred Tax Assets	5,871			5,592
Valuation Allowance	(181		)	(4		)
Deferred Tax Assets, Net of Valuation Allowance	5,690			5,588
Deferred Tax Liabilities
Financial statement deferred policy acquisition costs and reserves	(1,040		)	(894		)
Net unrealized gains on investments	(1,489		)	(669		)
Other depreciable and amortizable assets	(217		)	(185		)
Other	(47		)	—
Total Deferred Tax Liabilities	(2,793		)	(1,748		)
Net Deferred Tax Asset	$	2,897		$	3,840

[1]

On July 18, 2014, the U.S. Internal Revenue Service issued Internal Revenue Code Section 446 Directive (“the Directive”) regarding the tax treatment of hedging gains and losses related to the hedging of variable annuity guaranteed minimum benefits such as contracts with GMDB and GMWB riders. The Directive accelerated the tax deduction related to previously deferred investment hedging losses. While the acceleration did not have a material effect on the Company’s overall consolidated deferred tax asset, the Directive resulted in a re-characterization of deferred tax assets. The changes were a decrease in temporary differences for investment-related items and an increase in net operating loss carryover.

The Company has recorded a deferred tax asset valuation allowance that is adequate to reduce the total deferred tax asset to an amount that will more likely than not be realized. In assessing the need for a valuation allowance, management considered future taxable temporary difference reversals, future taxable income exclusive of reversing temporary differences and carryovers, taxable income in open carry back years and other tax planning strategies. From time to time, tax planning strategies could include holding a portion of debt securities with market value losses until recovery, altering the level of tax exempt securities held, making investments which have specific tax characteristics, and business considerations such as asset-liability matching. Management views such tax planning strategies as prudent and feasible and would implement them, if necessary, to realize the deferred tax assets.

As shown in the deferred tax assets (liabilities) table above, included in net deferred income taxes are the future tax benefits associated with the net operating loss carryover, foreign tax credit carryover, capital loss carryover, and alternative minimum tax credit carryover.



	For the years ended December 31,
	2014				2013				Expiration
	Carryover amount		Expected tax benefit, gross		Carryover amount		Expected tax benefit, gross		Dates			Amount
Net operating loss carryover	$	5,547	$	1,936	$	3,123	$	1,093	2016	-	2017	$	3
									2023	-	2033	$	5,544
Foreign tax credit carryover	$	178	$	178	$	163	$	163	2018	-	2024	$	178
Capital loss carryover	$	491	$	172	$	—	$	—	2019			$	491
Alternative minimum tax credit carryover	$	652	$	652	$	823	$	823	No expiration			$	—

Net operating loss carryover

As of December 31, 2014 and 2013, the net deferred tax asset included the expected tax benefit attributable to net operating losses of $5,547 and $3,123, respectively, consisting of U.S. losses of $5,508 and $3,123, respectively, and foreign losses of $39 and $0. If unutilized, the U.S. losses expire as follows: $3 from 2016-2017, $5,544 from 2023-2033. Utilization of these loss carryovers is dependent upon the generation of sufficient future taxable income. Due to limitations on the use of certain losses, a valuation allowance of $9 has been established in order to recognize only the portion of net operating losses that will more likely than not be realized.

Most of the net operating loss carryover originated from the Company's U.S. and international annuity business, including from the hedging program. Given the sale of the Japan subsidiary in June 2014, and continued runoff of the U.S. fixed and variable annuity business, the exposure to taxable losses from the Talcott Resolution business is significantly lessened. Given the expected earnings of its property and casualty, group benefits and mutual fund businesses, the Company expects to generate sufficient taxable income in the future to utilize its net operating loss carryover net of the recorded valuation allowance. Although the Company projects there will be sufficient future taxable income to fully recover the remainder of the loss carryover, the Company's estimate of the likely realization may change over time.

Alternative minimum tax credit and foreign tax credit carryover

As of December 31, 2014 and 2013, the net deferred tax asset included the expected tax benefit attributable to alternative minimum tax credit carryover of $652 and $823 and foreign tax credit carryover of $178 and $163 respectively. The alternative minimum tax credits have no expiration date and the foreign tax credit carryover expire from 2018 to 2024. These credits are available to offset regular federal income taxes from future taxable income and although the Company believes there will be sufficient future regular federal taxable income, there can be no certainty that future events will not affect the ability to utilize the credits. Additionally, the use of the foreign tax credits generally depends on the generation of sufficient taxable income to first utilize all U.S. net operating loss carryover. However, the Company has identified certain investments which allow for utilization of the foreign tax credits without first using the net operating loss carryover. Consequently, the Company believes it is more likely than not the foreign tax credit carryover will be fully realized. Accordingly, no valuation allowance has been provided on either the alternative minimum tax carryover or foreign tax credit carryover.

Capital loss carryover

As of December 31, 2014 and 2013, the net deferred tax asset included the expected tax benefit attributable to the capital loss carryover of $491 and $0, respectively. The capital loss carryover of $491 at December 31, 2014 was largely due to the loss on sale of the Company’s Japan subsidiary, HLIKK, which has been accounted for as discontinued operations. If unutilized, the capital loss carryover will expire in 2019. Utilization of the capital loss carryover requires the Company to realize sufficient taxable capital gains. While the Company has some ability to utilize the capital loss carryover by generating capital gains through tax planning strategies, the Company concluded that it is more likely than not that this asset will not be realized and, accordingly, in 2014, the Company has recorded a valuation allowance of $172 through discontinued operations.

Included in Other liabilities in the Consolidated Balance Sheets as of December 31, 2014 and 2013 are net deferred tax liabilities related to Japan of $0 and $61, respectively. The net deferred tax liability of $61 as of December 31, 2013 was comprised of taxes on future taxable income related to owed reinsurance recoverables, loss reserves and foreign currency translation adjustments.

As of December 31, 2014 the Company had a current income tax receivable of $38, of which $2 was related to Canada and due from a foreign jurisdiction. As of December 31, 2013 the Company had a current income tax receivable of $72, of which $70 was a payable related to Japan and due to a foreign jurisdiction.

The Company’s unrecognized tax benefits were unchanged during the years ended December 31, 2014, 2013, and 2012, remaining at $48 as of December 31, 2014, and 2013. This entire amount, if it were recognized, would affect the effective tax rate in the period it is released.

The Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years prior to 2007. The federal audit of the years 2007-2011 is expected to conclude in 2015 and it is reasonably possible the Company may be able to reduce part of or the entire amount of the unrecognized tax benefits within the next 12 months. Apart from the possible reduction in unrecognized tax benefits, management does not expect the conclusion of the federal audit for the 2007-2011 years will have a material impact on the consolidated financial condition or results of operations. Management believes that adequate provision has been made in the financial statements for any potential assessments that may result from tax examinations and other tax-related matters for all open tax years.

The Company classifies interest and penalties (if applicable) as income tax expense in the consolidated financial statements. The Company recognized interest expense of $0, $5, and $0 for the years ended December 31, 2014, 2013 and 2012, respectively. The Company had approximately $1 of interest payable for 2014 and 2013. The Company does not believe it would be subject to any penalties in any open tax years and, therefore, has not booked any accrual for penalties.

A reconciliation of the tax provision (benefit) at the U.S. Federal statutory rate to the provision (benefit) for income taxes is as follows:



	For the years ended December 31,
	2014			2013			2012
Tax provision (benefit) at U.S. Federal statutory rate	$	595		$	515		$	(31	)
Tax-exempt interest	(138		)	(138		)	(141		)
Dividends received deduction	(114		)	(139		)	(145		)
Valuation allowance	5			(2		)	—
Other	2			10			8
Provision (benefit) for income taxes	$	350		$	246		$	(309	)